Since the introduction of the Personal Savings Allowance with effect from 6th April 2016, 95% of taxpayers have no tax to pay on their savings income, including interest.
Because of this, the obligation on banks and building societies to deduct tax at source from payments of interest on accounts was removed from the same date.
From 6th April 2017, deduction at source will also end for interest distributions from OEICs, and unit trusts, and for interest on peer to peer lending.
Autonomy Wealth View: this will mean that investors in some well-known Corporate Bond and Distribution Funds, held outside of ISAs, will no longer need to reclaim the tax if they are non-taxpayers as they will instead receive the full gross distribution.
However, for those basic rate taxpayers with income of this kind where it exceeds the new Personal Savings Allowance (£1,000 for basic rate taxpayers), and/or the 0% savings band, they will now need to declare and pay this tax via self-assessment, registering for that if they have not already done so.